The Corridor Journal of Strategic Alliances Sustainable Energy & The Environment | Page 10

A Little
BACKGROUND:

Long Island’s Electric Utility Structure.
Yes, it’s complicated.

LIPA’s poor customer communications during and after
Superstorm Sandy sealed its fate and presented its
successor with an opportunity to shine by comparison.
In July 2013, New York State enacted the LIPA Reform
Act and awarded PSEG (Public Service Enterprise
Group) the electric utility operating contract through
a new entity, PSEG-Long Island. LIPA, was pared
down to about 20 employees and a board of directors.
LIPA, as a not-for-profit entity, (which was created
by the state after the dissolution of LILCO a decade
earlier) today retains oversight of PSEG-LI’s contract
and budget, and also acts as its finance arm. LIPA’s
status as a municipal agency allows it to issue bonds
at a favorable rate but was serendipitously positioned
to receive FEMA funds of nearly $1 billion to repair
infrastructure damage caused by Sandy. Con Edison
however, as a shareholder-owned company was not
similarly endowed and had to restore their system with
their own funds.
Whereas in New Jersey, PSE&G (Public Service
Electric & Gas) is both an electric and gas utility, the
holding company’s operation on Long Island runs only
the electric utility, while National Grid, a British-based
company, operates the gas utility and the gas-fed
electric power generation plants. Under NYS law, the
electric utility may not own the power generation assets,
and in PSEG-LI’s case that includes solar generation,
whether from utility scale projects or a homeowner’s
rooftop. By preserving that separation, Long Island’s
competitive solar industry has flourished.
PSEG-Long Island assumed all operating responsibility
from LIPA in January 2014, which came with a two-year
rate freeze on the fixed power delivery charge (about
half of a typical bill). Although customer satisfaction
appears to be way up in these past 16 months, in
contrast to LIPA’s very low scores, PSEG-LI
has
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recently come under fire after applying for a new rate
increase on the delivery charge: nearly 4% per year
for three years would cover infrastructure projects
and also award higher management fees under its
flat rate plus incentives contract. Ultimately, the NYS
Department of Public Service will decide the outcome
with public input.
Long Island’s electric power history has been troubled
since the Shoreham debacle, and its rates are among
the highest in the country. The NYS’s Department of
Public Service last summer recognized the region’s
unique situation and opened a branch office in Plainview
to review rates and make recommendations that would
normally come from Albany. But the Department has
no enforcement power, it may only recommend, which
has caused some people to fear that the balance of
power is too much in favor of the utility. There are other
complex variable factors in rules and ratemaking that
have put watchdogs on guard and in a mode of pushback on any further increases.
F urthermore, Governor Andrew Cuomo has played a
strong hand in energy policy-setting, incentives and
grant-making through the state agency NYSERDA and
its programs such as NY-SUN, with something new
being announced almost monthly. These programs give
PSEG and hundreds of LI companies in the renewableenergy and efficiency space a starting platform to
incentivize customer sales. Yet environmentalists would
like to see a much more forceful pace of transition to
renewables.
Long Island had suffered these past years from frail
infrastructure, the burden of a huge old debt from
legacy power plants, spikes in power demand on hot
summer days that had forced the creation of expensive
extra capacity, and plain bad governance during
the LILCO and LIPA epochs. Then there have been

quick swivels in key decisions and misreading of
policymakers’ and the public’s mood. Caithness
II was planned for Yaphank to be an immense
but supremely efficient power generation plant,
meant to fill Long Island’s gaps and allow dirtier
plants to wind down, but the 2% rate hike it would
have added onto customer bills made LIPA set the
project aside, at least for now. The proposed Deep
Water Wind project that would have introduced
a new power source to Long Island (and jobs)
is similarly being held off until a comprehensive
study is completed.
The Integrated Resource Plan led by PSEG-LI,
will be published in December 2015. Everything
we know about our power system is being reexamined, with cost-benefit analysis of both
supply and demand parts of the equation. The
plan could fundamentally change the regional
electric grid. A much greater role for renewables,
distributed (local) power sources, new incentives
to change customer behaviors and thus tightened
control over the demand curve, as well as a new
relationship between the public and its power
company are all in the balance. But will ratepayers
accept another uptick on their bills today, to build
the infrastructure for further integration tomorrow
of renewables into the power grid?
******
THE EDITORS ADD:
We should indeed have a healthy debate about
PSEG-Long Island’s rate requests and we need still
greater transparency. Most of all, we need to find a
way to balance the high initial cost of investment in
sustainable energy against the public’s impatience
with high power rates.
We should view the energy industry in its entirety
in the context of our well –being as an economy
and as families. Our region deserves the best
technology and practices that will give us
sustainable, affordable energy, along with clean air
and water. The utilities, the local businesses that
sell and service solar PV and geothermal systems,
the power management software and technology
that make buildings greener, the researchers
here on Long Island who will transform battery
storage and make renewable power vastly more
economical, and the public, all ought to pull in the
same direction.
What will Long Island’s power system look like
in 2030? We hope it costs less, is not a political
football, gives us more control as consumers who
can generate power and is clean and green.

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